Diesel price hike will push telecom tower cost by Rs 21 billion

According to reports, with the hike in diesel price, telecom companies would have to bear an additional burden of about Rs 2,100 crore over the next one year. The additional burden will eventually be passed on to the consumers that may increase tariff for mobile usage.

However, the additional spend on diesel could cross Rs 3,200 crore in near future considering that telecom tower companies buy bulk diesel.

The industry consumes about 2 billion litres of diesel every year, which is likely to go up to 3 billion litres considering the increasing teledensity in rural India as about 60% of towers in India solely depend on diesel, said Umang Das, director general, Tower and Infrastructure Providers Association (TAIPA).

About 60% of the towers in India depend solely on diesel for power generation and around 15% of diesel bought is pilfered at some stage. With taxes, hike in diesel prices would be about Rs 10.80. According to a research report by Citi, telecom tower companies consume about 1.7% of the total diesel consumption in India and the industry buys diesel in bulk.

In 2011, the Indian telecom industry had consumed an estimated 3.2 billion liters of diesel, and the amount could rise to six billion liters by 2020, according to a study by Greenpeace India. Going by Greenpeace report, the additional burden would be much more.

“Since the industry provides critical infrastructure, it should be given sops and the government should take a holistic view. Generating power by using diesel, in any case, increases costs. But, we have no alternative as we do not get connected to the power grid in the rural areas,” said Das, adding that tower companies are slowly shifting to renewable energy to avoid environment risks.

According to a study by consulting firm AT Kearney, India has about 350,000 telecom towers and spends Rs 8,500 crore a year on diesel and about 70,000 are not connected to the power grid.

The report also added that the Indian telecom sector was responsible for 5.2 million tonnes of CO2 emissions annually and responsible for over two% of India’s total greenhouse gas emissions.

Meanwhile, the Telecom Regulatory Authority of India (Trai) has directed tower companies to reduce dependence on diesel and run at least 50% of all rural towers and 20% of urban towers on hybrid power by 2015.